Despite the bullish momentum has partially waned after the earlier rally, oil prices remain at relatively high levels and will likely stay afloat in the near term as geopolitical tensions are still elevated, with the prospects for a recovery in the Saudi oil production are looking unclear. Brent slipped below the $64 figure while the bearish momentum is capped by the 100-DMA around $63.50 for now.
On the geopolitical front, the U.S. alleges Iran carried out the September 14 attack on Saudi Aramco's largest oil processor. Saudi Arabia also said it was unquestionably sponsored by Iran despite Yemen's Iranian-allied Houthi rebels claimed the assault. Meanwhile, the U.S. Secretary of State Mike Pompeo said the additional troops ordered to be deployed in the Gulf region, which makes traders worry about a potential war with Iran.
Against this backdrop, the downside risks for Brent are limited at this stage, with signs of a slower recovery in the Saudi Arabia production will likely keep the prices elevated. Technically, Brent will likely continue to trade above the $60 handle as long as tensions persist. The immediate upside target comes around $64, where the 200-DMA lies.